2 BlackRock ETFs For Passive Income In Retirement

For those of you in the midst of retirement planning, exchange-traded funds (ETFs) offer a way to generate dividend income without having to worry about individual stocks. Many well-known investors, including Warren Buffett, advise the same: buy and hold solid ETFs in your portfolio.

You can and should engage in stock-picking and research individual stocks if you have the time. But if you want to relax and pick out some ETFs to buy and hold for decades while receiving strong passive income, dividend ETFs may be better suited for you than individual stocks. They offer optimal stability and diversification, and most of them regularly rebalance to lower exposure to or kick out underperformers.

Of course, with an eye on wealth preservation, you should prioritize safety over growth at this stage. As part of that plan, don’t overlook stable income-focused ETFs because they may not keep up with tech’s enormous gains over the past few years. No one knows what the future will look like, so for those nearing or in retirement, remember: safety first.

24/7 Wall St. researched two BlackRock dividend ETFs that fit the bill and are worthy of your consideration if you have your eye on generating passive income in retirement.

Key Points in This Article:

• HDV provides investors with a strong dividend and attractive share appreciation.
• BINC, relatively new fund, offers shareholders an incredible dividend yield.
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iShares Core High Dividend ETF (HDV)

The iShares Core High Dividend ETF (NYSEARCA:HDV) should be a core holding with a considerable amount of weight in your retirement ETF portfolio. This ETF focuses on 75 large-cap U.S. stocks tracked by the Morningstar Dividend Yield Focus Index. All stocks here have a history of paying sustainable and high yields. The expense ratio is at 0.08%, meaning you’ll only pay $8 in fees for every $10,000 you put into HDV.

This is perfect if you want relatively high yield and exposure to the long-term uptrend of equities. HDV comes with a dividend yield of 3.1% and a quarterly distribution frequency. That 3.1% dividend yield may not look adequate in this environment, especially with some Treasurys paying above 4.8% yields. However, you’re very likely to outperform Treasurys in the long run, since the five-year annualized total return here is at 11.8%.

The holdings here are rebalanced quarterly. Plus, each constituent passes Morningstar’s “economic moat” and dividend-sustainability screens before inclusion.

Obviously, if you have exposure to stocks, you will have exposure to market drawdowns. If the broader economy enters a recession anytime soon, your portfolio will tank. HDV declined by over 33% during the 2020 crash. This was mainly driven by its energy holdings. The biggest holding here is ExxonMobil (NYSE:XOM) at 8.71%, followed by Johnson & Johnson (NYSE:JNJ) at 6.03%, AbbVie (NYSE:ABBV) at 5.58%, and Chevron (NYSE:CVX) at 5.82%.

CVX and XOM declined significantly due to oil prices going negative for the first time in their history in 2020. The drawdown from HDV back then shouldn’t be used as a yardstick for how it may perform in a future recession. The 2020 recession was truly extraordinary, and it’s unlikely that you’ll see oil prices go negative in your lifetime again.

HDV remains much less susceptible to a recession compared to the general market due to all the companies in this ETF having solid cash flows and moats.

Now, what you may still want more of is yield. 3.1% paid out quarterly is still a bit lacking in this environment. This second pick is your remedy.

iShares Flexible Income Active ETF (BINC)

The iShares Flexible Income Active ETF (NYSE:BINC) is a relatively new ETF, launched in May 2023. If you buy this ETF, you’re going to get a 6.37% annualized dividend yield (trailing). The distribution is paid out monthly. The forward dividend yield here is 5.3%.

The structure of BINC makes it a very good pick alongside HDV. It is an actively-managed ETF that maximizes long-term income instead of tracking a benchmark. It sits inside BlackRock’s suite of active bond ETFs and gives the portfolio managers freedom to rotate across multiple fixed-income sectors.

Non-U.S. Credit has the biggest exposure here at 22.5%, followed by U.S. High Yield Credit. You’ll also have exposure to Agency Residential, Commercial, Non-Agency Mortgages, followed by CLO Securities, Emerging Markets, ABS, and more. Management is likely to change allocations as they see fit, but BINC is an excellent hedge against the equity markets while being paid monthly.

The price swings here are very muted, with a low beta. You’re unlikely to see big swings in either direction.

The biggest negative is that the net expense ratio here is 0.40%, meaning you’ll pay $40 in fees for every $10,000 you invest.

I still think it’s worth paying those fees, since you’ll be in the right hands. Rick Rieder manages this ETF. He is responsible for managing $2.4 trillion in assets. He is BlackRock’s Global Chief Investment Officer for Fixed Income. Rick was awarded the 2023 Morningstar Award for Investing Excellence: Outstanding Portfolio Manager.

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